Keeping inflation, liquidity in the banking system and recent GDP number into consideration, it seems that RBI is likely to maintain pause as far as interest rate is concerned.
Headed by Reserve Bank Governor Shaktikanta Das, a meeting of the six-member Monetary Policy Committee (MPC) is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on Thursday, June 8.
The Reserve Bank of India (RBI) will maintain the policy repo rate at 6.5 per cent during its upcoming June 8 announcement, considering the easing of retail inflation in April and the potential for further decline, indicating the effectiveness of previous policy rate actions, anticipate experts.
Headed by Reserve Bank Governor Shaktikanta Das, a meeting of the six-member Monetary Policy Committee (MPC) is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on Thursday, June 8.
After the last MPC meeting in April, the RBI paused its rate hike cycle and stayed with the 6.5 per cent repo rate. Prior to that the central bank had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to contain inflation.
The MPC is meeting in the backdrop of consumer price-based (CPI) inflation declining to an 18-month low of 4.7 per cent in April. The Reserve Bank governor recently indicated that the May print would be lower than the April numbers. The CPI for May is scheduled to be announced on June 12.
Madan Sabnavis, Chief Economist, Bank of Baroda, said the RBI is most likely to continue to pause on the interest rates and retain repo rate at 6.5 per cent.
“The reason is that inflation has come in lower than 5 per cent in April and will be even lower in May. This being the case, the view would be that past repo rate actions have had an effect on inflation and hence there can be another pause taken,” he said.
The policy stance, he added, will however remain with withdrawal of accommodation since there has already been an increase in liquidity as deposits increase due to the announcement of the exchange of the Rs 2,000 notes.
The RBI will also be monitoring the progress of the monsoon and the possible ill effects of El Nino which can affect the kharif harvest and hence impact prices, experts said.
“For the year, however, we see 25-50 bps cut in repo rate which will be post October only,” Sabnavis said. The government has mandated the RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side. Bankers too expect that the central bank will continue its pause in the forthcoming policy.
“As far as bankers are concerned I would only say that RBI’s repo rate has already been increased 2.5 per cent. Expectations from the market or the banking side is that we do not expect that any rise in the repo rate would be there because already the interest rate has been raised by 2.5 per cent on the repo side and inflation is moderate,” Rajneesh Karnatak, Managing Director, Bank of India, told PTI.
(Input from PTI)
